One of the most important parts of selling a home is selecting the right price. Which is why the appraisal kills so many sales. Learn how to avoid this problem!
If you are thinking about selling your home, you may be researching local home prices. Maybe you’ve sold a home before and think you do not need the expertise of a Realtor. Before you make your mind up, please think about this:
They Know the Local Real Estate Market
It’s great if you know about home prices but knowing the local real estate market is vital when determining the correct list price. Your Realtor can help you select a price that is correct for your home and the current market conditions.
Your Realtor knows about the properties have sold recently, what the competition is like and the homes that were for sale but did not sell. Your real estate agent will understand these factors and advise you on the best initial list price and what you can expect the home to sell for.
Not only is selecting the correct price essential when selling a home, so is knowing the current market trends. If the local real estate market is cooling off, you must know what it will take to make a home sell. If it is a hot market, your Realtor can advise you on how to deal with multiple offers and select the best offer for your unique situation.
Today, home prices are increasing because the inventory of homes for sale is low and demand is high. Lots of industry experts are predicting that house prices will increase by 5 percent in the next year. When home prices are increasing, one possible hiccup when selling a home can be the bank appraisal.
If home prices are increasing, it is hard for appraisers to locate enough comparable sales (similar homes that that recently sold in the same area). The appraiser must be able to justify the contract price when doing the appraisal.
If the appraisal is lower than the contract price, the bank will not give the buyers a mortgage for the home. Which means you will have to find another buyer!
Quicken Loans monthly Home Price Perception Index (HPPI) measures the difference between what a property owner thinks their house is worth and the appraiser’s opinion of that home’s value.
Bill Banfield, Executive VP of Capital Markets at Quicken Loans recently said:
Based on the HPPI, it appears homeowners in the markets where prices are rising faster than the national average – like Denver, Seattle and San Francisco – are continuing to underestimate just how quickly home values are rising, so the average appraisal is higher than homeowner estimate.
On the inverse of that, homeowners in areas where the values aren’t rising as fast may think they are rising faster than they are, leading to the appraisal lagging the estimate.
The chart below illustrates the difference in home price estimates over the last 12 months:
As the chart above shows, home owners are often wrong about the value of their home. Please understand that selecting the correct price is not an easy task.
It requires the experience and specialized knowledge of a real estate professional! There are some websites such as Zillow that can get you close. But when you are talking about thousands of dollars, is close good enough?
The Take Away
Anyone selling their home must understand the importance of selecting the correct price for their home.
Overpricing a home leads to a home taking longer to sell. Even if a seller finds someone willing to overpay, if they are using a mortgage, the home will not appraise.
This means the bank will not give the buyer a mortgage. And your home will go back on the market with the stigma of not closing…